FinRegLab Events
Getting Ahead of the Curve: Emerging Issues in the Use of Artificial Intelligence and Machine Learning in Credit Underwriting
January 17, 2024 – 2:30 PM Eastern Time
FinRegLab hosted a webinar with senior federal financial regulators in January 2024 to discuss the growing use of artificial intelligence and machine learning in financial services, including credit underwriting. The webinar covered the following topics:
- How use of AI/ML is evolving in financial services, including recent developments such as generative AI;
- Consumer protection & safety and soundness concerns with regard to AI/ML applications, particularly for credit underwriting;
- Model transparency as a recurring concern for AI/ML applications;
- Relevant regulatory tools and initiatives.
The panel was moderated by FinRegLab CEO Melissa Koide and included the following participants:
Patrice Alexander Ficklin
Patrice Alexander Ficklin is the founding director of the Consumer Financial Protection Bureau’s Office of Fair Lending & Equal Opportunity, which leads the CFPB’s efforts to ensure fair, equitable, and nondiscriminatory access to credit. Her prior experience includes negotiating complex transactions and leading teams engaged in counseling industry and consumer advocate organizations on regulatory compliance, consumer protection, fair lending, fair housing and fair employment. Patrice mediated employment discrimination claims and arbitrated individual lending discrimination claims made by Black farmers in Pigford v. Glickman, a class action lawsuit against the U.S. Department of Agriculture. She is a graduate of Georgetown University and Harvard Law School.
Grovetta Gardineer
Grovetta N. Gardineer is the Senior Deputy Comptroller for Bank Supervision Policy at the Office of the Comptroller of the Currency (OCC). In this role, Ms. Gardineer directs the formulation of policies and procedures for the supervision and examination of national banks and federal savings associations, chairs the agency’s Committee on Bank Supervision, and serves on the OCC’s Executive Committee. She oversees the units for policy related to credit risk, market risk, operational risk, and compliance risk, as well as the units responsible for international banking and capital policy, accounting policy, and community affairs. She assumed this role in March 2019. Previously, Ms. Gardineer served as the Senior Deputy Comptroller for Compliance and Community Affairs since March 2016. In that role, she oversaw agency compliance exams on national banks and federal savings associations and supervised the agency’s Community Affairs and Community Reinvestment Act (CRA) programs. She also had responsibilities for policy and examination procedures relating to consumer issues and anti-money laundering and for representing the agency on interagency groups and activities related to compliance, CRA, fair lending, and the Bank Secrecy Act. Ms. Gardineer was the Chair of the NeighborWorks® America Board of Directors from June 20, 2016, to June 27, 2019, and is currently a board member. Ms. Gardineer previously served as Deputy Comptroller for Compliance Risk at the OCC and oversaw development of policy and examination procedures relating to consumer issues and anti-money laundering. She served as a key advisor to the Committee on Bank Supervision and to the Comptroller on compliance and CRA matters. Ms. Gardineer joined the OCC in 2010. Before joining the agency, she worked for the Office of Thrift Supervision, where she served as the Managing Director for Corporate and International Activities. Before that, she was the Managing Director for Supervision Policy, where she was responsible for several programs, including capital policy, credit risk, trust operations, accounting policy, and information technology risk assessment. Before joining the Office of Thrift Supervision, Ms. Gardineer spent several years as an attorney with the Federal Deposit Insurance Corporation handling enforcement actions and preparing policies and regulations affecting the financial services industry. Ms. Gardineer earned her juris doctor degree, cum laude, from North Carolina Central University and her bachelor’s degree from Wake Forest University.
David Palmer
David Palmer is a lead supervisory financial analyst in the Division of Banking Supervision and Regulation at the Federal Reserve Board. He focuses on several primary topic areas, including banks’ model risk management practices, banks’ and supervisors’ stress testing activities, banks’ capital planning practices, validation of supervisory stress testing models, and banks’ use of new financial technologies. He engages in both policy-related projects as well as on-site examinations. David was a primary author of the Federal Reserve’s Supervisory Guidance on Model Risk Management (SR 11-7), issued in April 2011 jointly with the OCC (and more recently with FDIC), and continues to lead the implementation of that guidance within the Federal Reserve. More recently, David has been involved in evaluating supervised firms’ use of fintech, including artificial intelligence/machine learning. He has a bachelor’s degree from Oberlin College and a master’s degree from Georgetown University.
Keith Ernst
Keith Ernst serves as Associate Director for Consumer Research & Analytics in the Division of Depositor and Consumer Protection at the FDIC. This role extends a career that has spanned the intersection of consumer financial services research, policy, and practice. In his present capacity, he leads a team of researchers and analysts that provides expertise to the FDIC’s compliance supervision program, produces data-driven insights to inform the organization’s perspective on economic inclusion concerns and public policy matters, and conducts original consumer research to learn more about consumer preferences and experiences with financial services and on related topics. Among other work, his team is responsible for producing the FDIC’s National Survey of Unbanked and Underbanked Households. He has published financial services research in various outlets, including academic journals, and made numerous presentations to research conferences, at industry events, as well as in testimony before Congress and regulatory agencies. He has previous analytic experience in secondary mortgage market operations and has served as a consultant in fair lending matters. He is a graduate of Hofstra University and holds both a master’s degree in public policy studies and a J.D. from Duke University.
Melissa Koide
Prior to establishing FinRegLab, Melissa served as the U.S. Treasury Department’s Deputy Assistant Secretary for Consumer Policy. In that role, Melissa helped to build the first government offered preretirement savings product, the myRA. She also established the $5 million Innovation Fund to support research and strategies to improve consumers’ financial health and their access to safe and affordable financial products and services. Melissa has testified before the Senate Banking and House Financial Services Committees, and she has spoken extensively to policy, industry, and consumer advocacy audiences. She is also a member of the New York State Department of Financial Services’ Financial Innovation Advisory Board.
Since FinRegLab sat down with stakeholders and federal regulators in fall 2020, the use of AI/ML in financial services has continued to spread. The launch of generative AI applications in November 2022 has further galvanized attention to potential concerns about accuracy, bias, explainability, and governance of AI/ML applications. In this session, we explore recent developments relating to the use of machine learning and new data sources in credit underwriting as well as other financial services applications.
Related Publications
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Explainability & Fairness in Machine Learning for Credit Underwriting: Policy Analysis
This policy analysis explores the regulatory and public policy implications of the increasing use of machine learning models and explainability and fairness techniques for credit underwriting in depth, particularly for model risk management, consumer disclosures, and fair lending compliance.
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Explainability & Fairness in Machine Learning for Credit Underwriting: Policy & Empirical Findings Overview
This paper summarizes the machine learning project’s key empirical research findings and discusses the regulatory and public policy implications to be considered with the increasing use of machine learning models and explainability and fairness techniques.
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Machine Learning Explainability & Fairness: Insights from Consumer Lending
This empirical white paper assesses the capabilities and limitations of available model diagnostic tools in helping lenders manage machine learning underwriting models. It focuses on the tools’ production of information relevant to adverse action, fair lending, and model risk management requirements.
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The Use of Machine Learning for Credit Underwriting: Market & Data Science Context
This report surveys market practice with respect to the use of machine learning underwriting models and provides an overview of the current questions, debates, and regulatory frameworks that are shaping adoption and use.
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AI FAQS: The Data Science of Explainability
This fourth edition of our FAQs focuses on emerging techniques to explain complex models and builds on prior FAQs that covered the use of AI in financial services and the importance of model transparency and explainability in the context of machine learning credit underwriting models.
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Explainability and Fairness in Machine Learning for Credit Underwriting
FinRegLab worked with a team of researchers from the Stanford Graduate School of Business to evaluate the explainability and fairness of machine learning for credit underwriting. We focused on measuring the ability of currently available model diagnostic tools to provide information about the performance and capabilities of machine learning underwriting models. This research helps stakeholders… Learn More
About FinregLab
FinRegLab is an independent, nonprofit organization that conducts research and experiments with new technologies and data to drive the financial sector toward a responsible and inclusive marketplace. The organization also facilitates discourse across the financial ecosystem to inform public policy and market practices. To receive periodic updates on the latest research, subscribe to FRL’s newsletter and visit www.finreglab.org. Follow FinRegLab on LinkedIn.
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